'Borrow R500, repay R505 and receive free packet of chicken' says the advertisement on a board outside Ukuvuya Financial Services in East London city centre. But what is happening inside the money lender's shop is quite different from the advertisement.

The company targets beneficiaries of the old age grant.

National Credit Regulator (NCR) Spokesperson Lebogang Selibi said Ukuvuya was not allowed to offer loans. Selibi said the company had been registered with the NCR, but registration had lapsed because Ukuvuya did not pay registration fees. As a result, the company was operating illegally, she said.

When GroundUp joined the queue on 1 March, the welcoming security guard quick informed us that beneficiaries of the child support grant and people who had jobs were not allowed to apply for loans; only beneficiaries of the old age pension.

Asked what a pensioner should supply when applying for a loan, the guard said a SA Social Security Agency (SASSA) payslip, a SASSA card and their ID. She said the client would receive a loan of R1,500 plus a grant of R100 for transport.

When GroundUp returned on 2 March at about 9:30am there were already close to 200 mostly elderly people waiting outside Ukuvuya loan shop.

A different security guard was checking documents. He told GroundUp that only people receiving old age grants and disability grants were given loans.

"We do not take the child support grant beneficiaries. Those ones are clever; they take the loan here, then change their cards. We prefer to deal with old people," he said.

He said new clients were given a loan of R1,500 to be repaid within four months.

Asked if the reporter's grandmother could rather take out a loan of just R500, the guard said loans started from R1,500.

"You must convince her to take it. She will also get an extra R100 you can use for transport," he said.

After about an hour, only five people had managed to get inside.

An Ukuvuya consultant, who identified herself as Yolanda Mayiphume, came to speak to new clients. She took their IDs and told them to wait.

Asked about the process, Mayiphume confirmed that new clients received a loan of R1,500 and the company deducts R418 over four months, making R1,672.

Asked about the chicken packet, Mayiphume said instead of a chicken, new clients would now receive R100 for transport.

Ukuvuya client Nkosivumile Dumezweni, 68, from Duncan Village told GroundUp he had been borrowing from Ukuvuya for five years.

He had intended to take a once-off loan, but now he could not stay away from the money lender, he said.

"It was 2012 when I started borrowing money here. I needed money to buy more groceries for my two grandchildren after their mother left with their social grant card to find a job in Port Elizabeth," said Dumezweni.

He said he first borrowed R500 from Ukuvuya and he was told that the company was going to deduct R680, but they deducted R720 from his pension.

"I was only left with R480. I had no choice. I had to borrow again because the money was not enough for my family," he said.

Asked about his current deductions, he said Ukuvuya deducted R800 from his R1,510 old age grant every month.

Mayiphume first denied this, but later said, "Maybe he is a regular customer, then it is hard to say how much is deducted from him."

Another client, who only identified herself as Maleta, said it was hard to stay away from Ukuvuya. She said the money she received from her grant was not enough.

"We live with our grandchildren and we cannot afford to feed them," she said.

Maleta said in April she would only receive R700 from her R1,510 grant. "Sometimes Ukuvuya gives us another loan before we have even finished paying the four-month loan," she said.

Another Ukuvuya consultant who was handing out pamphlets to people in Oxford Street, said said Ukuvuya was better than any money lender in East London.

The consultant, who identified himself only as Themba, said Ukuvuya did not deduct much and people were given four months to pay the loan. Asked how much was deducted in repayments on a R1,500 loan, he said Ukuvuya only deducted R500, but a client standing next to him said the company deducted R700 to R800 and he did not deny this.

The NCR's Selibi said interest on a short-term loan was limited to 5% per month for the first loan, and 3% on subsequent loans in a calendar year. Credit providers could also charge an initiation fee of up to 15% of the loan and a monthly service fee of R60. Some might charge for credit life insurance.

Asked what action the NCR would take, she said: "The NCR has an on-going investigation strategy targeting illegal credit providers and this entity will be included in these investigations."

SASSA spokesperson Paseka Letsatsi said the agency was aware of loan sharks targeting beneficiaries of social grants. SASSA had run campaigns warning beneficiaries not to be duped into accepting these loans at "ridiculous" interest rates.

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